ACFI impact figures are in
A new independent report says the residential aged care sector will lose $750 million in revenue, over the next two and a half years, because of recent Commonwealth changes to the ACFI.
This table is a graphic depiction of information in the report on page 23/29, under Appendix A, from the QPS Benchmarking ACFI Changes Review. It provides the results of the ACFI Dollar Lost revenue for ADL’s and CHC’s, COPO Shortfall and Overall Lost Revenue averaged per resident affected by the changes and total residents population within the study.
Article summary
- The Centre for International Economics has conducted an independent financial analysis of the changes to the ACFI, on behalf of the national peak body, LASA.
- The report found that 89 per cent of aged care facilities will face “unrecoverable” losses of revenue under the revised ACFI model.
- Average revenue loss per affected resident, according to the report will be $20,000 to $23,000 per annum or $56-$63 per day over the next two and a half years.
- Aged care providers are set to face a $750 million revenue shortfall from the point of implementation, 1 July 2012, to 31 December 2014.
By Yasmin Noone
The residential aged care sector is set to lose a cumulative total exceeding $750 million over the next two-and-a-half years because of recent federal government-made changes to the Aged Care Funding Instrument (ACFI), according to a new study released late last week.
The study – an independent financial analysis of changes to the ACFI – was conducted by the Centre for International Economics (CIE) for the sector’s newest national peak body, Leading Age Services Australia (LASA) to estimate the impact of the ACFI changes from the start of the current financial year to 31 December 2014.
According to the report, the projected sector-wide impact will be “felt incrementally as more and more residents become assessed under the post
July 1, 2012 funding formula”.
The research found that 89 per cent of aged care facilities will face “unrecoverable” losses of revenue under the revised funding model – an average loss, per affected resident, of $20,000 to $23,000 per annum or $56-$63 per day.
The annual average loss, per facility, was estimated at $125 000 “but with a wide variation in losses”, the report states.
The top five per cent of facilities most affected by the changes will incur an average annual revenue loss of $419,000, while the bottom five per cent of facilities to be least affected will lose an average of $15,000 in revenue each year.
The report has provided the newly formed peak body, LASA, with the proof it needs to call on the federal government to commit an additional $1.1 billion to the sector, over the next four years.
This funding, LASA believes, will counteract the need for the government to move funds away from residential aged care to fund another area of the Living Longer. Living Better (LLLB) reforms. For example, it is said that the $1.2 billion Workforce Compact received the bulk of the funds, redirected from the ACFI.
LASA, as part of its Industry Viability Action Plan, has also requested that the Commonwealth return ACFI funding to its previous levels, which were frozen on 1 July, 2012; and provide an annual 1.6 per cent increase to compensate for indexation changes.
This is despite the fact that the federal government is said to have faced considerable financial restraints in delivering a 2012/13 budget surplus.
The future looks stark, according to the report
CEO of LASA, Gerard Mansour, said these two proposed measures (above) are essential given that the recently announced ACFI changes will significantly impact upon a provider’s ability to care for an increasing number of aged care residents.
“Many nursing homes and in-home care providers are already under financial pressure and LASA has serious concerns that if the way aged care is funded is not addressed, there could be an impact on staffing levels and on the important services which are the very foundation of quality care,” said Mr Mansour.
“The average loss per aged care facility is more than $125,000 each year, with some facing revenue shortfalls of up to $560,000. Smaller and rural facilities are potentially the most affected.
“As running costs continue to rise, aged care providers – unlike most businesses – cannot increase care fees as they are set by the Federal Government.
“While we agree that the initial ACFI reforms in 2008 were a positive step, we cannot accept the government’s new regime which redirects money from resident care to other elements of the LLLB aged care package.”
The report, however, states that the figures presented are estimates projected over the next 30 months by which time almost all residents will be assessed under the new rules.
Sector-wide modeling therefore estimates that the ACFI changes will cause total unrecoverable losses of $98 million for the second half of 2012 (from 1 July 2012 to 31st December 2012 only), due to the loss of indexation on ACFI care subsidies across all care levels and the reduction in daily subsidies for the six month period.
The research clocks a total sector-wide loss of $300 million in 2013, as residents are progressively assessed under the post-July 2012 appraisal criteria and the impacts of the reduction in the 2013/14 financial year indexation are felt; and a loss of $353 million in 2014, as 95 per cent of residents get assessed under the post-July 2012 rules and the 2013/14 indexation loss is increasingly reflected in base care subsidy rates.
A new solution proposed
Mr Mansour said LASA was committed to working with the government to identify a long-term solution to aged care funding.
“The Australian aged care industry argues that the way government funds aged care needs to change,” he said.
“To ensure a viable aged care industry , we’re strongly advocating a move away from a funding model which is artificially constrained by the Federal Government’s budgetary limitations, to one which genuinely matches care funds to people’s needs.
“LASA strongly supports the call of the National Aged Care Alliance for an independent and comprehensive cost of care study as an urgent priority.
“We support the importance of aged care reform. We will work collaboratively with the Federal Government and other aged care stakeholders to refine when and how some of those reforms are introduced so that Australia has a sustainable aged care industry that meets the needs of older Australians.”
Report specifics
The economic modeling discussed throughout the report was based on detailed forecasts undertaken on:
-the number of residents requiring residential care by age group, trends in annual admissions by age group, the impact of ageing on the number of residents with a particular ACFI score, and expected resident turnover;
-the consequent number of residents that will be progressively assessed under the post 1 July 2012 funding arrangements;
-And, the proportion of those residents that are likely to receive a different score in question three of the Activities of Daily Living (ADL) domain and with respect to the Complex Health Care matrix (CHC); and the size of the change in funding that is attributable to affected residents.
“Forecasts on the number of older Australians requiring residential aged care have been made based on June 2010 data from the Australian Institute of Health and Welfare (AIHW), forecasts from the Australian Bureau of Statistics (ABS), and important assumptions about the number of Australians in each age group that transfer into residential care,” the report stated.
Recap of the changes to the ACFI
Effective from 1 July 2012, changes have been made to the Aged Care Funding Instrument (ACFI).
There are three components to the changes.
– A change to the scores in question 3 of the Activities of Daily Living (ADL) domain.
– A change to the Complex Health Care (CHC) matrix. Changes to ADL and CHC components will take effect for all new appraisals and reappraisals from 1 July 2012 onwards.
-A one-off reduction in the amount paid under the ACFI at all care levels from 1 July 2012. After indexation is applied from 1 July 2012, this means that ACFI subsidy rates will remain at their 30 June 2012 level.
About the study
LASA has previously commissioned the CIE to work on its behalf, as an independent body. Of note was the centre’s involvement in the launch of the new peak body earlier this year. However, the organisation says, all work conducted is done in an independent manner.
LASA engaged QPS Benchmarking to undertake an independent collection of data from aged care providers across Australia.
QPS analysed the impact of the data from a sample size of 275 residential aged care facilities at a total of 18,345 residents, a sample size of over 10 percent of all aged care residents nationally.
CIE was then engaged to undertake an independent analysis of the sample data collected by QPS and project the impact across the entire industry by developing a robust population wide model of aged care residents.
I believe that the governments decision to take away funding from aged care is disgraceful. Just because they need to find money from somewhere to bring their financial status into surplus, our frail and vulnerable will greatly suffer.
As it is nursing homes are short of staff, the resident:staff ratio is is greater than it should be and impacts negatively on resident care, but this reform will bring it to new dangerous levels. To compensate for their losses aged care providers will cut the amount of staff they have working the floor, this will lead to increased cases of neglect, poor care, poor service, and result in higher injuries. Staff will have to spend less time emotionally supporting these frail, emotionally fragile residents and as a result many will become increasingly depressed, lose the will to live, and be left to sit in their chairs unattended and unaided for hours on end. Not to mention the lack of staff to assist during meal times. Pressure Areas will be on the rise as there is not enough staff around to ensure regular repositioning. The amount of elderly coming into hospitals dehydrated and malnourished will increase as there is no one there to sit and take the 30 sometimes 40 minutes to feed them on a 1:1 basis.
Already stretched nurses will have to work even harder and will leave the profession in droves as who wants to work in such stressful conditions for such little pay? better off getting a job in another profession and get paid more.
With the increase of dementia patients in the next 40 years as predicted, the aged care industry will be in real trouble. The need for lower staff:resident ratios in dementia specific units to ensure the residents safety will not be met, and dementia residents will find themselves getting injured or in dangerous situations and uncared for properly through no fault of the nurses. How can you look after a large amount of wanderering and physically aggressive residents without the appropriate amount of staffing? will we have to resort to drugging everyone?
The aged care industry has worked rediculously hard at trying to turn the reputations of nursing homes around from being these dark dingy places where you are left to die, onto places where you go to be cared for and allowed to live your final years in comfort, compassion and warmth. This reform will undo everything we have all worked so hard for.
Maybe one day members of the government will need to go to an aged care facility to be cared for, and who will be left to look after them? Hope they can afford 24hr personalised nurses because thats the only way they will get good care.
It makes me sad to think that these elderly people who worked so hard to make Australia what it is today, that faught for our freedom, that built this country brick by brick, that someones beloved mother/father/sisiter/brother/aunt/uncle/cousin/spouse will be neglected and not recieve the care they deserve all because the government wants to regain the money it lost handing out cash during the GFC. Hmmmmm sad………..
Congratulations LASA, comiserations rescare providers,tragic news for high care residents!!!. The damage now looks worse than what any of us thought. Remember though, this is not a funding cut, according to Minister Butler, just an adjustment to the ACFI assessment tool with the objective of reducing expenditure by $500 Million at least to bring the increased outlay back to trend so that Treasuer Wayne Swan can achieve a budget surplus. Fat chance of that happening with all the cost blow outs in other areas. Let’s face it, there has been an amazing amount of cash spent on many other things that haven’t faced the same cuts. But, what the heck, aged care has never been important to the Gillard Gov’t, it can take a cut.
If the Gov’t is at all serious about delivery quality aged care and meeting the growing demand,let’s see them undertake a regional based nationwide comprehensive cost of care study, then fund it accordingly. Remember, the federal governmet have an obligation to adequately fund aged care to older Australians in need, so why do they have so much difficulty in maintaining something which was just and only just working. The LLLB package is really a bit of a sick joke in that we all have to wait until 2014 before we see any new funds flow and the irony is we will most likely have a different Government in power then, but they won’t be able to assist as there will not be any funds available. It’s a very sad cycle and an reflection on our system of government.
The Dept of Health & Ageing are always going on about evidence – based practice, so don’t you think it’s time they undertook a study to ascertain the cost of delivering not only the care but also the capital to provide quality residential care. Come on Mr Butler, what about it? Are you afraid that it will reveal that real costs exceed the Government’s funding levels?
The Centre for International Economics total of $1,875 per bed may be proved in total: $1.6 billion wind-back divide by 170,667 operating beds divide by 5 years = $1,875.
Isn’t it time that this information was made public instead of only to the industry.
I have recently listened to the speil from a federal politician talking about the wonderful offer that this government is making to provide additional training for personal carers, ie spending millions to create more personal carers. How are we going to give all these people jobs? It is basic primary school maths that cuts in care income & higher wages for staff will result in lesser staff hours. So even those with jobs will earn the same, decreased hours on higher pay, but have to work twice as hard to make up for the shortfall of hours. I would give my staff 10% increase for the valuable work they do above the call of duty if I had the income. Decent wages are long overdue, but in a recent EBA discussion my staff looked long & hard at the impact of decreased hours for some of their colleagues over greater pay increases. Our income & expenditure is transparent for them